People's Budget
Encyclopedia
The 1909 People's Budget was a product of then British Prime Minister
H. H. Asquith
's Liberal
government, introducing many unprecedented taxes on the wealthy and radical social welfare programmes to Britain's political life. It was championed by Chancellor of the Exchequer
David Lloyd George
and his strong ally Winston Churchill
, who was then President of the Board of Trade; the duo was called the "Terrible Twins" by contemporaries.
Churchill's biographer, William Manchester
, called the People's Budget "a revolutionary concept" because it was the first budget in British history with the expressed intent of redistributing wealth among the British public. It was a key issue of contention between the Liberal government and the Conservative
-dominated House of Lords
, ultimately leading to two general election
s in 1910 and the enactment of the Parliament Act 1911
.
on 29 April 1909. Lloyd George argued that the People's Budget would eliminate poverty, and commended it thus:
The budget included several proposed tax increases to fund the Liberal government's welfare reforms. Income tax
was held at nine old pence
in the pound
(9d, or 3.75%) for incomes less than £2,000, which was equivalent to £ in today's money—but a higher rate of one shilling
(12d, or 5%) was proposed for incomes greater than £2,000, and an additional surcharge or "super tax" of 6d (a further 2.5%) was proposed on the amount by which incomes of £5,000 (£ today) or more exceeded £3,000 (£ today). An increase was also proposed in inheritance tax
and naval rearmament.
More controversially, the Budget also included a proposal for the introduction of a land tax based on the ideas of the American tax
reformer Henry George
. This would have had a major effect on large landowners, and the Conservative
-Unionist
opposition, which consisted mostly of large landowners, had a large majority in the Lords. Furthermore, the Conservatives believed that money should be raised through the introduction of tariff
s on imports, which was to benefit British industry and to raise revenue for social reforms at the same time (protectionism
). Interestingly, according to economic theory, such tariffs would have been very beneficial for land owners, especially in agricultural produce (see Corn Laws
).
, with the Liberals relying on Labour and the Irish Nationalists for their majority. The Lords accepted the Budget on 29 April 1910—a year to the day after its introduction—when the land tax
proposal was dropped, but contention between the government and the Lords continued until the second general election in December 1910, which resulted again in the Unionists gaining more votes than the Liberals but producing another hung parliament, with the Liberals again relying on Labour and the Irish Party. Nonetheless, the Lords passed the Parliament Act 1911
.
Prime Minister of the United Kingdom
The Prime Minister of the United Kingdom of Great Britain and Northern Ireland is the Head of Her Majesty's Government in the United Kingdom. The Prime Minister and Cabinet are collectively accountable for their policies and actions to the Sovereign, to Parliament, to their political party and...
H. H. Asquith
H. H. Asquith
Herbert Henry Asquith, 1st Earl of Oxford and Asquith, KG, PC, KC served as the Liberal Prime Minister of the United Kingdom from 1908 to 1916...
's Liberal
Liberal Party (UK)
The Liberal Party was one of the two major political parties of the United Kingdom during the 19th and early 20th centuries. It was a third party of negligible importance throughout the latter half of the 20th Century, before merging with the Social Democratic Party in 1988 to form the present day...
government, introducing many unprecedented taxes on the wealthy and radical social welfare programmes to Britain's political life. It was championed by Chancellor of the Exchequer
Chancellor of the Exchequer
The Chancellor of the Exchequer is the title held by the British Cabinet minister who is responsible for all economic and financial matters. Often simply called the Chancellor, the office-holder controls HM Treasury and plays a role akin to the posts of Minister of Finance or Secretary of the...
David Lloyd George
David Lloyd George
David Lloyd George, 1st Earl Lloyd-George of Dwyfor OM, PC was a British Liberal politician and statesman...
and his strong ally Winston Churchill
Winston Churchill
Sir Winston Leonard Spencer-Churchill, was a predominantly Conservative British politician and statesman known for his leadership of the United Kingdom during the Second World War. He is widely regarded as one of the greatest wartime leaders of the century and served as Prime Minister twice...
, who was then President of the Board of Trade; the duo was called the "Terrible Twins" by contemporaries.
Churchill's biographer, William Manchester
William Manchester
William Raymond Manchester was an American author, biographer, and historian from Springfield, Massachusetts, USA, notable as the bestselling author of 18 books that have been translated into over 20 languages...
, called the People's Budget "a revolutionary concept" because it was the first budget in British history with the expressed intent of redistributing wealth among the British public. It was a key issue of contention between the Liberal government and the Conservative
Conservative Party (UK)
The Conservative Party, formally the Conservative and Unionist Party, is a centre-right political party in the United Kingdom that adheres to the philosophies of conservatism and British unionism. It is the largest political party in the UK, and is currently the largest single party in the House...
-dominated House of Lords
House of Lords
The House of Lords is the upper house of the Parliament of the United Kingdom. Like the House of Commons, it meets in the Palace of Westminster....
, ultimately leading to two general election
United Kingdom general elections
This is a list of United Kingdom general elections since the first in 1802. The members of the 1801–1802 Parliament had been elected to the former Parliament of Great Britain and Parliament of Ireland, before being co-opted to serve in the first Parliament of the United Kingdom, so that Parliament...
s in 1910 and the enactment of the Parliament Act 1911
Parliament Act 1911
The Parliament Act 1911 is an Act of the Parliament of the United Kingdom. It is constitutionally important and partly governs the relationship between the House of Commons and the House of Lords which make up the Houses of Parliament. This Act must be construed as one with the Parliament Act 1949...
.
Overview
The Budget was introduced in the British Parliament by David Lloyd GeorgeDavid Lloyd George
David Lloyd George, 1st Earl Lloyd-George of Dwyfor OM, PC was a British Liberal politician and statesman...
on 29 April 1909. Lloyd George argued that the People's Budget would eliminate poverty, and commended it thus:
The budget included several proposed tax increases to fund the Liberal government's welfare reforms. Income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
was held at nine old pence
Penny (British pre-decimal coin)
The penny of the Kingdom of Great Britain and later of the United Kingdom, was in circulation from the early 18th century until February 1971, Decimal Day....
in the pound
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
(9d, or 3.75%) for incomes less than £2,000, which was equivalent to £ in today's money—but a higher rate of one shilling
Shilling
The shilling is a unit of currency used in some current and former British Commonwealth countries. The word shilling comes from scilling, an accounting term that dates back to Anglo-Saxon times where it was deemed to be the value of a cow in Kent or a sheep elsewhere. The word is thought to derive...
(12d, or 5%) was proposed for incomes greater than £2,000, and an additional surcharge or "super tax" of 6d (a further 2.5%) was proposed on the amount by which incomes of £5,000 (£ today) or more exceeded £3,000 (£ today). An increase was also proposed in inheritance tax
Inheritance tax
An inheritance tax or estate tax is a levy paid by a person who inherits money or property or a tax on the estate of a person who has died...
and naval rearmament.
More controversially, the Budget also included a proposal for the introduction of a land tax based on the ideas of the American tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
reformer Henry George
Henry George
Henry George was an American writer, politician and political economist, who was the most influential proponent of the land value tax, also known as the "single tax" on land...
. This would have had a major effect on large landowners, and the Conservative
Conservative Party (UK)
The Conservative Party, formally the Conservative and Unionist Party, is a centre-right political party in the United Kingdom that adheres to the philosophies of conservatism and British unionism. It is the largest political party in the UK, and is currently the largest single party in the House...
-Unionist
Unionist
-United Kingdom:In the United Kingdom, British unionists are those people and political organisations who wish their area to remain or become part of the United Kingdom...
opposition, which consisted mostly of large landowners, had a large majority in the Lords. Furthermore, the Conservatives believed that money should be raised through the introduction of tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s on imports, which was to benefit British industry and to raise revenue for social reforms at the same time (protectionism
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
). Interestingly, according to economic theory, such tariffs would have been very beneficial for land owners, especially in agricultural produce (see Corn Laws
Corn Laws
The Corn Laws were trade barriers designed to protect cereal producers in the United Kingdom of Great Britain and Ireland against competition from less expensive foreign imports between 1815 and 1846. The barriers were introduced by the Importation Act 1815 and repealed by the Importation Act 1846...
).
Constitutional stand-off
The House of Lords vetoed the new budget on 30 November 1909, setting the stage for a tremendous showdown, which Churchill relished. The Liberals countered by making their proposals to reduce the power of the Lords the main issue of the general election in January 1910. The Unionists won more votes than the Liberals but not more seats, and the outcome was a hung parliamentHung parliament
In a two-party parliamentary system of government, a hung parliament occurs when neither major political party has an absolute majority of seats in the parliament . It is also less commonly known as a balanced parliament or a legislature under no overall control...
, with the Liberals relying on Labour and the Irish Nationalists for their majority. The Lords accepted the Budget on 29 April 1910—a year to the day after its introduction—when the land tax
Land value tax
A land value tax is a levy on the unimproved value of land. It is an ad valorem tax on land that disregards the value of buildings, personal property and other improvements...
proposal was dropped, but contention between the government and the Lords continued until the second general election in December 1910, which resulted again in the Unionists gaining more votes than the Liberals but producing another hung parliament, with the Liberals again relying on Labour and the Irish Party. Nonetheless, the Lords passed the Parliament Act 1911
Parliament Act 1911
The Parliament Act 1911 is an Act of the Parliament of the United Kingdom. It is constitutionally important and partly governs the relationship between the House of Commons and the House of Lords which make up the Houses of Parliament. This Act must be construed as one with the Parliament Act 1949...
.